Governor of the Central Bank on economic strategy

Governor of the Central Bank, Arjuna Mahendran says that a 4.4 deficit of GDP could be achieved, if the one off taxes introduced by the interim budget was implemented in its entirety.

He made this statement, speaking exclusively to News1st on Friday.

What is the projected growth Rate for Sri Lanka?

We are projecting a growth rate of over 7 percent, I think seven and half percent would be reachable. That is based on the fact that there is renewed confidence in the economy and we also think that the growth of private sector credit from the banking system could also help growth along. So I would not be surprised if we exceeded our target but I will be cautious and say seven and seven and half for now.

The IMF Mission head in Sri Lanka had noted recently that achieving a 4.4 deficit of GDP will be challenging for Sri Lanka. Do you agree?

The honourable Minister of Finance has cleaned up the numbers and he was put forward much realistic revenue target. Even there, If you look at the broader picture the collection of government revenue has fallen to 10. 3 percent of GDP. I think the challenge for the treasury for the year 2015, is to raise that revenue collection and go back to at least 15 to 17 percent of GDP, and hopefully improve the fiscal deficit. But then I think 4.4 percent could be achieved. If the one off taxes which were imposed with the recent interim budget, were to be implemented in their entirety. Let’s wait and see, it is too early I think to make a definite projection on this.

Sri Lanka needs to go for a balanced economic strategy is a general sentiment that is expressed by many economists. Do you think that sourcing loans from China alone, is a threat to our economy?

We have no problem with China. But obviously the Chinese government was funding a lot of these investments projects through bank loans, and as a general strategy it is not a good idea to take all your bank loans from one lender, particularly if you are a country like Sri Lanka. So, from that perspective it is good to diversify the sources of loans and I think the idea is to diversify the countries we deal with, that could include countries like India, Japan and eventually the United States.